EDMONTON, Alberta – Capital Power Corporation (Capital Power, or the Company) (TSX: CPX) today released financial results for the quarter ended March 31, 2015.
Net income attributable to shareholders in the first quarter of 2015 was $40 million and basic earnings per share attributable to common shareholders was $0.41 per share, compared with $32 million, or $0.33 per share, in the comparable period of 2014. Normalized earnings attributable to common shareholders in the first quarter of 2015, after adjusting for one-time items and fair value adjustments, were $27 million or $0.32 per share compared with $26 million or $0.32 per share in the first quarter of 2014. Net cash flows from operating activities were $107 million in the first quarter of 2015 compared with $84 million in the first quarter of 2014. Funds from operations were $108 million in the first quarter of 2015, up 17%, on a comparable basis, from $92 million in the first quarter of 2014.
“Despite cyclical price lows in Alberta’s power market, Capital Power’s financial results for the first quarter were in line with expectations,” said Brian Vaasjo, President and CEO of Capital Power. “This performance reflects both excellent operating availability across the fleet, and the hedging of a significant portion of Capital Power’s Alberta electricity production in anticipation of lower power prices during the bottom of the Alberta power market cycle.”
“Alberta spot power prices averaged $29 per megawatt-hour due to increased generation from the Shepard Energy Centre and other wind facilities, warmer weather, and lower market demand,” said Mr. Vaasjo. ”A significant percentage of generation from Capital Power’s Alberta baseload plants in 2015 was hedged in the range of mid-$50 per megawatt-hour, well above the average spot price in the first quarter.”
Normalized earnings per share of $0.32 are unchanged from the first quarter a year ago when Alberta power prices averaged $61 per megawatt-hour.
“Our operating performance in the first quarter was excellent, highlighted by an average plant availability of 98 per cent,” added Mr. Vaasjo. “We generated $108 million in funds from operations in the first quarter and remain on track to meet the lower end of our $365 to $415 million target range.”
Operational and Financial Highlights 1
Three months ended
|(millions of dollars except per share and operational amounts)||2015||2014|
|Electricity generation (excluding acquired Sundance PPA) (GWh)||3,398||3,241|
|Generation plant availability (excluding acquired Sundance PPA) (%)||98||94|
|Net income attributable to shareholders of the Company||$40||$32|
|Normalized earnings attributable to common shareholders(2)||$27||$26|
|Basic and diluted earnings per share||$0.41||$0.33|
|Normalized earnings per share(2)||$0.32||$0.32|
|Funds from operations(2)||$108||$92|
|Purchase of property, plant and equipment and other assets||$52||$75|
|Dividends per common share, declared||$0.340||$0.315|
1 The operational and financial highlights in this press release should be read in conjunction with Management’s Discussion and Analysis and the audited Consolidated Financial Statements for the three months ended March 31, 2015.
2 Earnings before finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange losses, and gains on disposals (adjusted EBITDA), normalized earnings attributable to common shareholders, normalized earnings per share and funds from operations are non-GAAP financial measures and do not have standardized meanings under GAAP and are, therefore, unlikely to be comparable to similar measures used by other enterprises. See Non-GAAP Financial Measures.
Approval of normal course issuer bid and suspension of Dividend Re-investment Plan
On March 25, 2015, Capital Power’s normal course issuer bid to purchase and cancel up to 5 million of its outstanding common shares during the one-year period from April 7, 2015 to April 6, 2016 was approved by the Toronto Stock Exchange. Effective with the expected June 30, 2015 dividend, Capital Power also announced that its Dividend Re-investment Plan (DRIP) for its common shares will be suspended until further notice. Shareholders participating in the DRIP will begin receiving cash dividends on the expected July 31, 2015 payment date.
Shepard Energy Centre begins commercial operations
On March 11, 2015, Capital Power and ENMAX Corporation announced that Shepard Energy Centre is now fully operational and capable of generating over 800 MW of electricity to the Alberta grid. Capital Power became a 50% owner of this natural gas facility in 2012 and its final construction costs are expected to be $854 million which includes an accrued performance bonus due to the turbine manufacturer.
Capital Power and the Board of Directors announced the appointments of Bryan DeNeve to the executive position of Senior Vice President, Finance and Chief Financial Officer and Stuart Lee to the executive position of Senior Vice President Corporate Development and Commercial Services effective May 1, 2015. Mr. DeNeve and Mr. Lee formerly held the positions of Senior Vice President Corporate Development and Commercial Services and Senior Vice President, Finance and Chief Financial Officer, respectively.
Secondary offering of Capital Power shares by EPCOR
On April 2, 2015, EPCOR exchanged 9.450 million of its exchangeable common limited partnership units in Capital Power L.P (CPLP) for common shares of Capital Power on a one-for-one basis and sold 9.450 million common shares of Capital Power to the public pursuant to a secondary offering at $23.85 per common share. Capital Power did not receive any of the proceeds from EPCOR’s sale of common shares. These transactions reduced EPCOR’s ownership interest in CPLP to 9.1% from its interest of 18% at March 31, 2015. EPCOR then exchanged all of its remaining outstanding exchangeable common limited partnership units in CPLP for common shares of Capital Power (the exchange). After giving effect to the secondary offering and exchange, EPCOR owns approximately 9.1% of the common shares of Capital Power. EPCOR has advised that it plans to eventually sell all or a substantial portion of its remaining interest in Capital Power, subject to market conditions, based on its requirements for capital and other circumstances that may arise in the future. In connection with the offering and exchange, the Registration Rights Agreement between Capital Power and EPCOR was terminated. Thus, the Company will no longer be obligated to assist EPCOR in making a secondary offering and any future sales of common shares by EPCOR will be completed by other means.
In connection with the changes, EPCOR no longer may appoint any directors to Capital Power’s Board of Directors after the Company’s annual general meeting of shareholders on April 24, 2015.
The debt payable to EPCOR, as at March 31, 2015, of $334 million is recorded as current since EPCOR may, by advance written notice, require repayment of all or any portion of the outstanding principal amount of this debt and accrued interest thereon.
The Company intends to review the structure of CPLP with the goal of simplifying the organization structure and reporting, and reducing costs associated with CPLP, including audit, legal, board, management and filing expenses.
Analyst Conference Call and Webcast
Capital Power will be hosting a conference call and live webcast with analysts on April 27, 2015 at 11:00 AM (ET) to discuss its first quarter results. The conference call dial-in numbers are:
(604) 681-8564 (Vancouver)
(403) 532-5601 (Calgary)
(416) 623-0333 (Toronto)
(514) 687-4017 (Montreal)
(855) 353-9183 (toll-free from Canada and USA)
Participant access code for the call: 21543#
A replay of the conference call will be available following the call at: (855) 201-2300 (toll-free) and entering conference reference number 1176897# followed by participant code 21543#. The replay will be available until July 26, 2015.
Interested parties may also access the live webcast on the Company’s website at www.capitalpower.com with an archive of the webcast available following the conclusion of the analyst conference call.
Non-GAAP Financial Measures
The Company uses (i) adjusted EBITDA, (ii) funds from operations, (iii) cash flow per share, (iv) discretionary cash flow, (v) normalized earnings attributable to common shareholders, and (vi) normalized earnings per share as financial performance measures. These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP, and are, therefore, unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to gross income, net income, net income attributable of shareholders of the Company, net cash flows from operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to complement GAAP measures in the analysis of the Company’s results of operations from management’s perspective. Reconciliations of adjusted EBITDA to gross income, operating income and net income, funds from operations to net cash flows from operating activities and normalized earnings attributable to common shareholders to net income attributable to shareholders of the Company are contained in the Company’s Management’s Discussion and Analysis, prepared as of April 23, 2015, for the three months ended March 31, 2015 which is available under the Company’s profile on SEDAR at www.SEDAR.com.
Forward-looking information or statements included in this press release are provided to inform the Company’s shareholders and potential investors about management’s assessment of Capital Power’s future plans and operations. This information may not be appropriate for other purposes. The forward-looking information in this press release is generally identified by words such as will, anticipate, believe, plan, intend, target, and expect or similar words that suggest future outcomes.
Material forward-looking information in this press release includes expectations regarding: (i) funds from operations, and (ii) Shepard Energy Centre capital costs.
These statements are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity and other energy prices, (ii) performance, (iii) business prospects and opportunities including expected growth and capital projects, (iv) status and impact of policy, legislation and regulation, and (v) effective tax rates.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results and experience to differ materially from the Company’s expectations. Such material risks and uncertainties are: (i) changes in electricity prices in markets in which the Company operates, (ii) changes in energy commodity market prices and use of derivatives, (iii) regulatory and political environments including changes to environmental, financial reporting and tax legislation, (iv) power plant availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) acquisitions and developments including timing and costs of regulatory approvals and construction, (vii) changes in market prices and availability of fuel, and (viii) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis, prepared as of February 20, 2015, for further discussion of these and other risks.